The Connected Company

by Dave Gray

If you make customers unhappy in the physical world, they might each tell six friends. If you make customers unhappy on the Internet, they can each tell 6,000 friends. — Jeff Bezos

Our mission statement about treating people with respect and dignity is not just words but a creed we live by every day. You can’t expect your employees to exceed the expectations of your customers if you don’t exceed the employees’ expectations of management. — Howard Schultz

But most of these services are not really services at all. They are factory-style processes that treat people as if they were products moving through a production line. Just

To this end, a company with a service orientation cannot be designed and organized around efficiency processes. It must be designed and organized around customers and experiences.

The first step to a service orientation is to change the way we think about products. Instead of thinking about products as ends in themselves, we need to think of them as just one component in an overall service, the point of which is to deliver a stellar customer experience.

When they call your customer service line and hear a recorded voice saying, “Your call is important to us,” guess what? They don’t believe you.

Your most unhappy customers are your greatest source of learning. — Bill Gates

Xerox PARC was based in Silicon Valley, a far remove from Xerox headquarters in Rochester, NY. While this gave researchers great freedom to pursue new ideas, it also made it more difficult for them to convey the opportunities to senior executives. At the time, copiers were generating huge profits, and Xerox still saw itself as a copier company.

Focusing on customers doesn’t mean trying to please everyone. It’s about getting a deep sense of who your customers are and what they care about.

When in doubt, don’t look inside your company for answers. Turn around and face the market. Get back in touch with your customers.

This interdependence creates a need to synchronize and coordinate the work. Traditionally, this has been the job of management and bureaucracy. They coordinate the work through measurement and control.

the more idiot-proof the system, the more behavior is constrained, forcing people to act like idiots even when it’s against their better judgment.

There are tradeoffs everywhere you look, in every organization:

The more tradeoff decisions you make, the more complex the whole structure becomes, until you get to a point where you can’t make any more changes without causing damage somewhere else in the organization. Over time, the structure gets more rigid and inflexible.

The average life expectancy of a company in the S&P 500 has dropped from 75 years (in 1937) to 15 years in a more recent study.

To adapt, companies must operate not as machines but as learning organisms, purposefully interacting with their environment and continuously improving, based on experiments and feedback.

We are accustomed to thinking of companies as machines. But machines can’t learn, and therefore they can’t adapt. Learning is a property of organisms.

Every authoritarian hierarchy is resisted by an informal organization that opposes and subverts the formal organization.

As companies add people, productivity shrinks. But as cities add people, productivity actually grows.

In a machine-like company, senior executives can fiddle with the controls, and individuals need only focus on their functions — since they are cogs in the machine, they don’t need to understand the machine’s higher purpose.

Command intent is a style of management used by the US Military when a situation is too complex or uncertain to give detailed orders.

Good profits come from creating value for customers. Bad profits come at the expense of happy customers and long-term sustainable growth. Bad profits come from customers who are locked in, who feel trapped or abused. Bad profits come from nuisance fees, like airlines charging extra for checked baggage, car rental companies charging $10 per day for a GPS unit that cost them $100, or banks charging $15 to $25 for a bounced check that costs the bank less than $3. Bad profits maximize transaction value, but they destroy relationships in the process. And bad profits are addictive.

Profits are not a cause of success, they are an effect. They are a result.

Executives tend to be compensated for things like profits and stock price. This sounds reasonable. But it’s not hard to show profits in the short term while destroying long-term value.

Focusing on the jobs customers are trying to do will help you understand what you are competing against from the customer’s point of view.

Learning requires feedback in order for performance to improve. The most important judge of service quality is the customer. Therefore, the most important feedback is customer feedback.

Over time, most processes become rigid, bureaucratic, and bloated with rules, regulations, and procedures for handling this or that.

But imagine a company that trusts every employee to use her best judgment and act in the best interests of the customer and the company. A company where employees have all the information they need to make good decisions. A company where most of the policies and procedures that constrain and limit employees are unnecessary, because every worker is fully authorized to act as a representative of the company, to make decisions, and to authorize expenses when necessary. If you can imagine these things, then you are imagining a learning company.

Learning is fundamentally different than training. Training is when a company teaches people how to do stuff that the company already knows how to do. Learning is a way to deal with new, uncertain, and ambiguous situations, a process of exploration by which you come to find and discover new things.

individuals will never be punished for making a wrong decision.

There’s this constant churn that, while it does make the whole organization less efficient in the short term, in the long term creates a learning, adaptive organization.

A connected company learns and adapts by distributing control to the points of interaction with customers, where semi-autonomous pods pursue a common purpose supported by platforms that help them organize and coordinate their activities.

complex systems like Netflix’s are designed to be resilient. This means they continue to work even when many of the parts are broken.

The chaos monkey…goes around killing things, killing services. The chaos monkey is the building inspector that makes sure that you followed the planning department’s advice and you built a safe building that won’t burn down. If you build something that’s fireproof, it doesn’t matter how much fire there is. It’s fireproof. The chaos monkey is our pet arsonist.

New hires are subject to peer review: after a one-month trial, team members vote, and a two-thirds majority is required to keep the person on the team.

People in a functional group tend to identify with one another more than they identify with the purpose of the organization.

Nordstrom employees can offer the best service in the industry because every Nordstrom salesperson operates a business within the business, backed by the full support and resources of a Fortune 500 company.

Semco is organized around the belief that employees who can participate in a company’s important decisions will be more motivated and make better choices than people receiving orders from bosses.

“If you want people to act like adults, you need to treat them like adults.”

The strength of the team is each individual member. The strength of each member is the team. — Phil Jackson

Teams are limited in size to about 8–10 people. At Amazon, they call them two-pizza teams: if you can’t feed a team with two pizzas, it’s too large.

the more flexible and adaptive you are, the less consistent your behavior will be. The benefit, though, is that you free people to bring more of their intelligence, passion, creative energy, and expertise to their work.

What we need to do is learn to work in the system, by which I mean that everybody, every team, every platform, every division, every component is there not for individual competitive profit or recognition, but for contribution to the system as a whole on a win-win basis. — W. Edwards Deming

You can’t make a recipe for something as complicated as surgery. Instead, you can make a recipe for how to have a team that’s prepared for the unexpected.

“The best way to predict the future is to invent it.” – Alan Kay